Originally published Oct. 10.
NEW YORK (GenomeWeb) – With several new diagnostic products slated for launch over the next two years, molecular diagnostics firm Veracyte is hoping to more than double the addressable market for its products from $800 million currently to $2 billion by 2016.
"In two years, with the introduction of two new products that are intended to build out our presence in the pulmonology sector we will more than double our addressable market," Veracyte CEO Bonnie Anderson said during a webcast of the firm's investor day this week.
In other presentations, Veracyte executives and several experts provided an in-depth overview of the company's growth strategy, including the science underlying its tests, the treatment gaps these diagnostics address, and the savings they will impart. Currently, the company's lead products include the Afirma Gene Expression Classifier (GEC) and the Afirma Malignancy Classifier.
The GEC is a tool doctors can use to gain more specific prognostic insights (i.e. a result of benign or suspicious) on a thyroid nodule that is indeterminate for cancer by fine needle aspiration. Meanwhile, the malignancy classifier, which Veracyte launched in May, is intended to help doctors make surgical decisions for those malignancies that are deemed suspicious by the GEC and are on track for surgery. The company estimates the market size for GEC to be around 200,000 patients worldwide, and approximately 75,000 patients in the US for the malignancy classifier.
Since Veracyte went public a year ago, the company has been enjoying a growth spurt. The company boasted 70 percent revenue growth in the first half of this year compared to the first half of 2013. It has received positive recommendations for GEC in treatment guidelines, and the test has been adopted by various institutions. Based on the reimbursement contracts Veracyte has inked to date with payors for GEC, the total covered lives for the test stands at 135 million.
Notably, Cigna and UnitedHealthcare, two insurers that had agreed to cover GEC last year, have now granted in-network status to the test, which will take effect at the end of this year. Market analysts expect this will be a positive driver for test adoption. "Given some physicians are reluctant to use out-of-network tests, the contracts should incrementally accelerate doctor adoption, in our opinion," Piper Jaffray analyst William Quirk wrote in a note following the investor day presentations.
Moreover, last month, Veracyte made its first acquisition, snapping up Allegro Diagnostics, which will add a new lung cancer test to its portfolio. This acquisition will "accelerate our entry into pulmonology," Veracyte's Anderson said during the investor day presentation. Originally, the company had hoped to enter the space in two years, but now with this acquisition, Veracyte is aiming to launch the first test in the pulmonology market next year.
The Allegro Dx test, previously called BronchoGen, is designed to help doctors figure out which patients with lung nodules are at low risk for cancer and can be monitored with CT scans and avoid invasive surgical procedures. The molecular diagnostic analyzes cytologically normal epithelial cells in the respiratory tract, garnered through bronchoscopy, and detects changes that occur in response to smoking that may be indicative of cancer.
Veracyte expects to launch this test, which has already been studied in two prospective clinical validation studies and in nearly 1,000 patients, in the second half of 2015. The company hopes the test will start to bring in "meaningful revenue" by 2017.
There are 250,000 bronchoscopy procedures performed annually in the US to investigate suspicious lung nodules. However, 40 percent turn out to be non-diagnostic and cause much uncertainty for doctors trying to figure out whether to subject patients to invasive procedures. Among the surgeries that are performed, 40 percent yield results showing the nodule to be benign.
This is where Veracyte is hoping its lung cancer test garnered through Allegro Dx can make a difference. In an investor day presentation, Anil Vachani of the Perelman School of Medicine at the University of Pennsylvania, cited data from a study, which showed that out of 50 patients with a negative bronchoscopy and benign disease subjected to invasive follow-up, 42 percent ended up with a benign result from the Allegro Dx test and could have avoided surgery.
Veracyte also is planning to launch in 2016 a molecular test for diagnosing interstitial lung diseases, a diverse group of hard-to-diagnose disorders that impacts 200,000 patients each year in the US and in major European countries. In particular, among this group of 140 or so diseases, doctors are most concerned with whether patients have idiopathic pulmonary fibrosis (IPF), which has a five-year survival rate of under 30 percent. The test Veracyte is developing will help doctors gain more prognostic insights on a person with an uncertain diagnosis of IPF and determine whether they can avoid invasive procedures.
With the Afirma tests and the two pulmonary diagnostic products, the company is focused on developing molecular tests that reduce unnecessary and invasive procedures, as well as the cost of care. "Nobody wants surgery they don't need. Nobody wants surgery at all," Erik Alexander of Brigham and Women's Hospital said during the investor day presentations, adding that in his practice having benign Afirma test results has bolstered physician confidence about not subjecting patients to unnecessary surgery.
He cited a study in which 322 indeterminate nodules were tested with the GEC, yielding a benign result for 174 and a suspicious result for 148. Doctors recommended surgery for only 2 percent of benign results, but 95 percent of suspicious results.
Veracyte recently amended the terms of its co-promotion deal with Sanofi subsidiary Genzyme for its Afirma tests. Slated to take effect in January next year, the new terms now decrease Veracyte's co-promotion fees to Genzyme from 32 percent to 15 percent of Afirma revenue.
The two firms will continue to co-promote Afirma globally, making a country-by-country decision as to whether to jointly promote the tests in a geography or hand off exclusivity to Veracyte. "In the US we will continue with segmentation around the sales process where each company can be positioned with their strengths," Anderson said. "This change will allow us to keep a substantially higher percent of the revenue that today gets paid to Genzyme."